The most archaic and acrimonious law ends on 6th April 2022. No longer will married couples have to force the blame on one party to divorce. It will be no longer necessary for either party to prove “fault”. Plus, it’s a whole lot easier – it can all be done online without lawyers.
What does this have to do with mortgage advisers? Quite a lot. The predictions are that there will be many more divorces; whilst this is an awful projection, there are a few opportunities to help our businesses and clients.
Let me explain:
- No more joint protection applications, even for joint mortgages. Whether the house is joint tenancy or tenancy in common should make no difference. We should be arranging two single life policies instead of the ubiquitous joint life plan.
- Fixed-rate mortgages are widespread, with rates on the rise. However, the early repayment penalties can be an issue if couples separate within the fixed term. Although it is possible for one party to port the fixed deal, this may not be possible with affordability constraints.
- Silver borrowers. Aptly named, those over the age of 60 will also be divorcing. The baby boomers still represent a large proportion of the population and mostly sit in high-value homes. Divorce will need to see these homes either sold to give both parties cash to buy on their own or by releasing equity to pay off the other party. I see equity release becoming even more popular.
- Re-mortgage opportunities for all joint borrowers arranging cash to pay off the other party.
- Transfer of equity requests from your clients. Time to dust off the CeMAP 2 manual to refresh how this works. You don’t want them to contact the lender directly, so make sure you understand how they can be achieved. Maybe an opportune time to begin your advanced mortgage exams.
- You may wish to partner with professional mediators in town if you need to make a client referral. Mediators are a fraction of the cost of lawyers and help cooperative couples to split.
- Openings to use Google Adwords or Facebook advertising for your newfound expertise in raising finance for divorcing couples. Get in there early to drum up some new business.
- Ensure you have a referral conduit to an IFA who can talk about pension splits and investment sharing. Alternatively, this might be a propitious time to qualify yourself in this area.
- Revise your firm’s vulnerable client rules as splitting couples is often defined by over-eager compliance departments.
- Finally, set up a system for your KIT list. I talk about this regularly. KIT stands for Keep in Touch. Regular reviews with your mortgage clients will reveal issues and challenges. You may be able to help them with other financial or other needs. KIT listing is not just for financial planners and IFAs – all professional mortgage advisers/brokers should adopt this healthy practice.